Yesterday, the House passed the reconciliation bill, and while one harmful provision was removed, most remain and the stakes are high for philanthropy.
This week, as the final House version of the bill was being written and debated on the floor, IPA’s Foundations on the Hill (FOTH) delegation was working the halls of Congress. Your outreach to Indiana’s representatives eased their path. Our team met face-to-face with every Indiana congressional office, sharing how the bill would affect our communities—and making the case for changes.
Our efforts are being recognized nationally. Claudia Cummings op-ed in The Hill featured IPA’s concerns about taxing philanthropy—and we’ve heard it’s being read by lawmakers and staff as they begin shaping the Senate version. We’ve been heard. But we haven’t finished.
What Was Removed from the Bill
The provision allowing the government to revoke nonprofit tax-exempt status without due process was removed.
This victory reflects the coordinated advocacy by IPA members, national philanthropy-serving organizations, and their members across the country. But the bill now moves to the Senate, and your voice is needed to secure the next wins.
What’s Still in the Bill
- Tiered Excise Tax on Private Foundations: The proposal to impose a steeply tiered excise tax on foundation investment income—up to 10% for the largest foundations—is projected to divert over $200 million each year away from Hoosier nonprofits and into the Washington bureaucracy. Every dollar taxed is a dollar not invested here at home in faith-based institutions, education, disaster relief, and other community priorities.
- Corporate Giving Restrictions: The introduction of a 1% floor before corporations can deduct charitable contributions may unintentionally disincentivize giving, especially among small and mid-sized businesses that are vital community partners. In a state like Indiana, where local employers play an outsized role in civic life, this change could disincentivize giving, and it threatens to disrupt long-standing partnerships between local business and local solutions.
- Expansion of Unrelated Business Income Tax (UBIT): The proposed changes to the Unrelated Business Income Tax (UBIT), including taxes on parking and transportation, is an example of regulatory overreach that increases compliance burdens and diverts unrestricted resources away from programs that are typically used for innovation, and community responsiveness.
What We Support
The temporary universal charitable deduction for non-itemizers remains in the bill—a positive step that allows all taxpayers to support charitable work.
OBBBA Recap
On May 22, 2025, the House of Representatives cleared a major hurdle, advancing its version of a 2025 Fiscal Year (FY2025) budget reconciliation bill, H.R. 1 One Big Beautiful Bill Act of 2025 (OBBBA), by a vote of 215 to 214. Totaling more than 1,000 pages, the legislation uses a complicated congressional procedure known as “budget reconciliation” to allow the Senate to pass it with fewer votes than would normally be required, and without bipartisan support.
The OBBBA is estimated by the Congressional Budget Office (CBO) to cost at least $2.5 trillion over 10 years. It includes extensions and modifications of expiring 2017 Tax Cuts and Jobs Act (TCJA) provisions, new corporate and individual tax provisions, repeal and modification of Inflation Reduction Act (IRA) energy tax provisions, $1.3 trillion in cuts from Medicaid and other federal health and nutrition programs—including the Supplemental Nutrition Assistance Program (SNAP), Medicare or Affordable Care Act (ACA) coverage—and modification of rules for health insurance sold in the commercial market.
Most attention on this budget bill has centered around issues like the tax code, Medicaid, and immigration. However, there are more hidden in the House’s reconciliation proposal, including provisions that negatively impact philanthropy. As previously outlined:
- Increased private foundation excise tax: Currently, all private foundations (other than exempt operating foundations) pay an excise tax of 1.39% of net investment income. The House-passed bill creates a tiered system, where the largest foundations would be subject to a tax of 10% of their net investment income. This results in a $220M+ annual impact to the State of Indiana.
- 1% floor for charitable contributions from corporations: Currently, corporations can deduct their charitable contributions from taxable income, up to 10% of their taxable income. This legislation creates a floor, meaning corporations must donate at least 1% of their taxable income before being eligible to receive a deduction.
- Unrelated Business Income Tax: Currently, nonprofits must pay a tax on income from activities that constitute an “unrelated trade or business.” This bill includes fringe benefits that nonprofits provide to employees (such as parking) as part of a nonprofit’s unrelated business taxable income.
The legislation also includes a modest charitable deduction for nonitemizers capped at $150 for single filers and $300 for joint filers, sunsetting at the end of 2028. This does not include contributions to donor-advised funds.
Following IPA’s Foundations on the Hill Event and passage of the OBBBA, Congress went into recess which gave agencies and analysts a chance to study the specifics before the Senate takes up the bill. Back to work this week, the Senate will consider its own budget reconciliation package, which may (or may not) be different from the House’s version—as the process and timeline remain unclear. The Senate could strip and insert an entirely new version of the bill or opt for a line-by-line review and edit of the current House version.
Word on the Hill
A group of GOP senators have openly criticized the package as they aim to deliver it to President Trump by July 4.
Sen. Ron Johnson, R-Wis., said he thinks there are “enough” Republicans to “stop the process” in order to prioritize stronger reductions in spending and the national deficit.
Recently, Johnson said in an interview on CNN’s “State of the Union” that congressional Republicans should examine spending “line by line, like DOGE has done” to find areas to eliminate.
Several Republicans in the Senate have expressed skepticism about aspects of the bill for what they view as inadequate spending cuts or shrinking Medicaid access and have promised to change it. Any changes to the bill would need to be approved by the House before it goes to the President for signage.
Process Moving Forward
Senate consideration of its reconciliation bill will follow expedited procedures if the bill meets budget resolution instructions and reconciliation rules.
Upon being brought to the floor, a minimum of 20 hours of debate will occur, which will be followed by a “vote-a-rama.” In a typical session, hundreds of amendments will be proposed, but only a dozen or more will be voted on and even less adopted. Often used as a political messaging tactic, this process allows the minority party and any member to force votes on amendments that ordinarily would not be considered on the Senate floor. Amendments must be germane, and points of order can be raised by any member against provisions in the reconciliation that are seen as non-germane. However, to override the point of order and keep the questioned provision in the bill, a supermajority of 60 votes is required.
As a last step, both the House and Senate must pass an identical version of the reconciliation bill that can be presented to the President. While the President can veto the bill at this stage, it would require the process to completely restart, beginning with the adoption of a fresh budget resolution.
